U.S. crude oil prices hit $70 on Monday, the highest level for nearly eight months, as Iran's pursuit of its nuclear programme heightened fears the U.S. might take military action against the oil-producing nation.
U.S. light sweet crude was trading 45 cents higher at $69.75 by 1110 GMT, off a session high of $70.
The session peak was the highest since Hurricane Katrina battered oil infrastructure in the U.S. Gulf Coast and drove U.S. crude to a record of $70.85 on August 30 last year.
London's Brent crude on Monday rose 54 cents to $71.11 after touching a new record-high of $71.40.
The drama over Iran's face-off with the West, the rise of insurgency in Nigeria and gasoline supply concerns in the U.S. ahead of the driving season are keeping a high floor under oil, said Victor Shum at consultancy Purvin & Gertz in Singapore.
Former Iranian president Akbar Hashemi Rafsanjani said on Monday Iran would continue to enrich uranium following its announcement last week it had enriched uranium for use in power stations.
The Islamic Republic of Iran does not intend to stop, he told reporters in Kuwait during a visit to the Gulf state.
The West suspects the nation is trying to build an atomic bomb and talk of a U.S. attack has topped the international news agenda since a report in the New Yorker magazine this month said Washington was considering using tactical nuclear weapons to knock out Iran's subterranean nuclear sites.
Fear of possible disruption of supplies from Iran, the world's fourth largest oil exporter, have helped to drive the price of U.S. crude 20 percent higher since mid-February.
Another concern is the shut-in of more than 500,000 barrels per day in OPEC producer Nigeria following militant unrest.
Royal Dutch Shell (RDSa.L) said on Monday it had yet to assess its offshore EA field, despite hopes a preparatory assessment would be made last week.
The review would be a step toward resuming production at the 115,000 barrels per day field, considered to be the easiest to restart of those that have been shut in.
Analysts say the loss of high quality Nigerian crude will become more and more of an issue as the U.S. driving season, which begins in May, approaches.
Light sweet crude is particularly sought after by refiners during the spring and summer as it provides a high yield of gasoline, said Mike Wittner of investment bank Calyon.
He added the Nigerian shortfall could not be made up for by the world's largest oil exporter Saudi Arabia, whose spare capacity is heavy, sour and more difficult to process.
Ministers from the Organization of the Petroleum Exporting Countries have said there is nothing more the group can do to calm the markets.
On production there is nothing we can do. We are already producing at maximum output, Qatar's Oil Minister Abdullah al-Attiyah said. There is no shortage in supply.
OPEC, which is expected to hold informal talks later this week on the sidelines of the International Energy Forum in Doha, would probably keep oil output steady for the rest of this year if demand holds steady and prices stay high, he added.
A senior OPEC delegate also said on Monday the producer group was unlikely to change current production levels as things stand and that supplies were adequate to cope with unexpected shortages or rising demand.
(Additional reporting by Luke Pachymuthu in Singapore)